CFA Level I · CFA Level I Exam · Guidance for Standard I: Professionalism
An analyst uses a valuation model to produce a target price. To obtain a more attractive result, she knowingly leaves out an input that would lower the value, then tells clients the output is the stock's value. Which statement best describes her conduct under Standard I(C)?
Her conduct is best described as a violation for both actions. Knowingly omitting an input makes the result misleading, and model outcomes represent expected results based on inputs and process, so presenting them as fact is also a misrepresentation under Standard I(C).
- AAcceptable, because models are widely used tools
- BA violation for omitting an input, but not for presenting the output as fact
- CA violation for both the knowing omission of an input and for presenting model output as factCorrect
Explanation
The guidance states that knowingly omitting inputs can produce misleading outcomes, and that model outcomes must not be presented as fact because they are expected results based on the inputs and process used. She did both.
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